Supreme Court Holds CoC Approval Binding Before NCLT Confirmation Under IBC

New Delhi: The Supreme Court has ruled that a resolution plan cleared by the committee of creditors with the required majority cannot be pulled back by lenders before the National Company Law Tribunal decides on it, even if the company has turned profitable. The ruling in Bank of India and Others v S M Kamal Pasha and Others, 2026 INSC 1154, deals with the gap under the Bankruptcy and Insolvency Code between creditor approval and judicial approval under Section 31. Improved results alone, the Court said, are no ground to refuse a plan that otherwise meets the law.

Lenders in the case wanted to step back from their vote. Their argument was that the debtor's position had improved after approval and confirmation should be withheld. Opposing that plea, the successful resolution applicant said a vote taken in line with the statute creates obligations that hold until the Tribunal decides under Section 31. The Court agreed with the applicant on the law, while leaving untouched a direction from the appellate tribunal asking the Tribunal to look at both the approved plan and a one-time settlement offer from the holding company.

CoC vote cannot be reopened at will

Approval by creditors, the judgment said, is more than an expression of intent. Once the required majority has voted for a plan after testing viability, feasibility and distribution, lenders in the class stay tied to that decision through the rest of the process. A later improvement in the debtor's books may matter to commercial assessment before the vote. It does not by itself wipe out a decision already taken.

For banks and financial institutions that sit on creditor panels, the reading shuts a route tried in several cases. In the past lenders cited fresh cash flows, revival of orders or an unsolicited settlement offer to seek a fresh vote or time to reconsider. Dissatisfaction with the commercial bargain, without failure to meet statutory conditions, will not support withdrawal while the plan is pending before the Tribunal, the Court said.

Bidders had pressed for that certainty. A resolution applicant puts in money, lines up guarantees, arranges management and works to a timetable on the strength of the creditor vote. If that vote could be withdrawn whenever trading picked up, the price found through negotiation and voting would lose meaning. The judgment protects the applicant who has stayed with the process and met the conditions laid down by law.

What Bankruptcy and Insolvency Code says on approval

Passed as the Insolvency and Bankruptcy Code 2016 India legislation, the law splits work between commercial and judicial bodies. The committee votes on plans placed before it under Section 30, after the resolution professional checks compliance with Section 30(2) on payment priorities, implementation, supervision and conformity with law. Approval needs sixty-six per cent of voting share. The plan then goes to the Tribunal for approval under Section 31.

Judicial review at that second stage is narrow by design. The Tribunal does not act as a second commercial panel to decide if a higher recovery could now be had. It checks whether the plan meets Section 30(2), whether the process in the statute and regulations was followed, and whether the plan can be carried out. Earlier rulings of the Supreme Court describe this as a check on legality and process, with commercial wisdom left to creditors. The present decision carries that split into the wait between the two approvals.

Inside that structure, better profitability carries limited legal weight. A debtor may post stronger quarterly results, lower losses or new business while approval is awaited, especially where the moratorium has given breathing room and operations have continued under monitoring. Such movement standing alone does not make a compliant plan liable for rejection, the Court said. The Tribunal must still ask if the plan satisfies the statute, not if creditors could have struck a harder bargain with hindsight.

That leaves creditors with recourse where real defects come to light. If a plan fails to provide for insolvency resolution process costs, ignores the priority due to operational creditors and dissenting financial creditors, contains an illegality, or was got by material irregularity in voting, the Tribunal can refuse confirmation. What the Court has ruled out is refusal based only on a sense that the debtor now looks stronger and might pay more outside the plan.

NCLAT direction on OTS left intact

Alongside that finding, the Court refused to interfere with a direction of the National Company Law Appellate Tribunal for the Tribunal to consider both the approved resolution plan and a one-time settlement proposal from the holding company. The appellate tribunal had not set aside the creditor vote or ordered a fresh process. It had asked that the settlement offer be placed before the Tribunal when the confirmation plea is taken up.

One-time settlement proposals run on a different track from resolution plans. They are usually negotiated between borrower group entities and lenders for closure of dues, often with upfront payment terms, and do not go through voting and distribution in the same way as a plan under the statute. Tribunals have at times been asked to keep such offers in view where they arrive before confirmation, particularly when the offer comes from persons linked to the debtor and promises payment.

By keeping that direction alive, the Court held the two tracks apart. The approved plan keeps its binding character and must be tested against Section 31. At the same time the Tribunal will have the holding company's proposal on record and will have to decide, in accordance with law, what weight, if any, it can carry at confirmation. The judgment does not treat the settlement offer as a substitute for the statutory vote, nor does it allow the offer to be used as a reason to abandon that vote.

Counsel in such matters will study this part of the order closely. Late settlement offers have often led to pleas for adjournments, fresh negotiation or remand to the creditor panel. The Court's approach requires the Tribunal to move ahead with confirmation on the basis of statutory compliance, without turning the pendency of a settlement into ground for indefinite delay. Any consideration of the offer must fit within the powers open to the Tribunal at that stage.